The relevant section for email configuration is [mail function], and to make PHP use an external mail server you must set SMTP to your ISP's mail server's address. This will be the same address that you use in your email program for the outgoing mail server, "smtp.isp.net", for example. The other setting sendmial_from, which specifies the default email address PHP emails are sent from.
Configure PHP to Use a Remote SMTP Server for Sending Mail
Note that setting up the internal mail function to use SMTP is only available on Windows. On other platforms, PHP should use the locally available sendmail or sendmail drop-in just fine. Alternatively, you can use the PEAR Mail Package.
A typical configuration might look like:
SMTP = smtp.isp.net
sendmail_from = firstname.lastname@example.org